My question is: Applicable to both US and Canada
QUESTION: My friend is selling one of her properties here in Canada. It is elected as her PPR and she will be exempt from any capital gains tax. However, she also currently resides in the US as is worried about any tax implications this sale may have.
Are her worries unwarranted? She is a Canadian and British citizen with landed immigrant status in the US. Thanks.
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david ingram replies:
Your friend can NOT have a tax free Principal residence in Canada if she is a resident of the United States unless she has continued to file a Canadian return as a resident and rep[orted her world income to Canada each year.
If she did that, and does not own and live in another home in the US, she may claim it as a tax free pricipal resident provided it has not been rented while she has been gone.
If she has become a US tax resident (automatic if she has a green card), then the house can be tax free (up to $250,000 US profit since she entered the US) IF she has occupied it as her residence for a full 24 months out of the last 60.
Obviously, you should not make any decisions based upon this email.
If she has moved to the US and has rentals in Canada, she should have filled out forms NR-6 with a Canadian tax agent for the rentals and that agent should be filing an NR4 by march 31st each year to report the rent collected in her name. Just as the HSBC or B of M, or Scotiabank would deduct 10% tax on any interest paid to a non-resident and send the non-resident an NR4 slip rather than a T-5 slip to report the interest.
When your friend left Canada, (assuming she has not been filing Canadian returns as a resident), she should have filed Canadian form T1135 to report the value of her assets when leaving. This would include her personal residence, mutual funds, stock accounts, and any other real estate holdings.
If any perceived profits are calculated because of the deemed sale and reacquiistion of capital assets when leaving Canada (Departure Tax), she should have filed forms 1243 and 1244 to defer the tax.
The taxation in the US is determined by paragraphs Article XIII(6) and (7)
6. Where an individual (other than a citizen of the United States) who was a resident of Canada became a resident of the United States, in determining his liability to United States taxation in respect of any gain from the alienation of a principal residence in Canada owned by him at the time he ceased to be a resident of Canada, the adjusted basis of such property shall be no less than its fair market value at that time.
7. Where at any time an individual is treated for the purposes of taxation by a Contracting State as having alienated a property and is taxed in that State by reason thereof and the domestic law of the other Contracting State at such time defers (but does not forgive) taxation, that individual may elect in his annual return of income for the year of such alienation to be liable to tax in the other Contracting State in that year as if he had, immediately before that time, sold and repurchased such property for an amount equal to its fair market value at that time.
Paragraph 6 deals with the principal residence which was tax free up to the date of departure.
Paragraph 7 refers to the taxable profits calculated and deferred on forms 1243 and 1244 and allows other properties to have their cost price adjusted for US tax purposes to the values on the date of emmigration/immigration.
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So, if she is treating herself as a resident of the US an dhas another house in the US, she will be taxable in Canda and the US on any profit or gain in valuse from the date she moved to the US.
If she is still taxing herself as a resident of Canada and does not own and live in a home in the US and lived in the Canadian house for 24 out of the 60 months before sale, the house is tax free in both couintries.
If she is taxing herself as a resident of Canada and has a home in the US, she has to decide which house she is going to claim as her tax free residence for Canadian tax purposes because she can only have one. If she elects to claim the Canadian house tax free, then she will owe CANADIAN tax on the US house even if she bought it after moving to the US.
Your friend needs to talk to someone who knows what to ask and what to do and we do provide that service. You can see charging details in the following pricing guidelines.
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David Ingram wrote:
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It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when i am out of town.
However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. As an example, as I write this on June 28th, since June 16th (12 days), my 'spammed out' box has 7,118 unread messages, my deleted box has 2630 I have actually looked at and deleted and I have answerd 63 email questions I have answered for clients and strangers. I have also put aside 446 messages that I am maybe going to try and answer because they look interesting.
Therefore, if an email is not answered in 24 to 36 hours, it is lost in space. You can try and resend it but if important, you will have to phone to make an appointment. Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
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Cell (604) 657-8451 -
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email to taxman at centa.com
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Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax Immigration Wizard Antarctica Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention
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